UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
þ
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended March 31, 2005
OR
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Transition Period From ___________ to ___________
000-50511
Commission File Number
UNITED AMERICA INDEMNITY, LTD.
| Cayman Islands | ||
| (State or other jurisdiction | 98-0417107 | |
| of incorporation or organization) | (I.R.S. Employer Identification No.) |
WALKER HOUSE, 87 MARY STREET
P.O. BOX 908GT
GEORGE TOWN, GRAND CAYMAN
CAYMAN ISLANDS
(Address of principal executive office including zip code)
(345) 949-0100
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES þ NO o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). YES þ NO o
As of May 6, 2005, the registrant had outstanding 23,679,789 Class A Common Shares and 12,687,500 Class B Common Shares.
TABLE OF CONTENTS
| (1) | On January 24, 2005, we completed our merger with Penn-America Group, Inc., as well as our acquisition of Penn Independent Corporation. In connection with the transactions, our shareholders approved a change in our name from United National Group, Ltd. to United America Indemnity, Ltd. Under purchase accounting rules, our results of operations for the quarter ended March 31, 2005 reflect the addition of Penn-America Group, Inc. and Penn Independent Corporation from January 25, 2005 through March 31, 2005. All prior period results reflect only the results of operations of United America Indemnity. |
As used in this quarterly report, unless the context requires otherwise, 1) “United America Indemnity,” “we,” “us,” and “our” refer to United America Indemnity, Ltd., an exempted company incorporated with limited liability under the laws of the Cayman Islands, and its U.S. and Non-U.S. Subsidiaries; 2) our “U.S. Subsidiaries” refers to U.N. Holdings II, Inc., U.N. Holdings Inc., Wind River Investment Corporation, American Insurance Service, Inc., Emerald Insurance Company, Penn-America Group, Inc., our U.S. Insurance Operations and our Agency Operations; 3) our “U.S. Insurance Operations” refers to the insurance and related operations conducted by American Insurance Service, Inc.’s subsidiaries, including American Insurance Adjustment Agency, Inc., International Underwriters, LLC, J.H. Ferguson & Associates, LLC, the United National Insurance Companies and the Penn-America Insurance Companies; 4) the “United National Insurance Companies” refers to the insurance and related operations conducted by United National Insurance Company and its subsidiaries, including Diamond State Insurance Company, United National Casualty Insurance Company, and United National Specialty Insurance Company; 5) the “Penn-America Insurance Companies” refers to the insurance and related operations of Penn-America Insurance Company, Penn-Star Insurance Company, and Penn-Patriot Insurance Company; 6) the “Agency Operations” refers to Penn Independent Corporation, PIC Holdings, Inc., Penn Independent Financial Services, Inc., Penn Oceanic Insurance Co., Ltd. (Barbados), Residential Underwriting Agency, Inc., Stratus Insurance Services, Inc., Stratus Web Builder, Inc., Apex Insurance Agency, Inc., APEX Insurance Services of Illinois, Inc., Summit Risk Services, Inc., Delaware Valley Underwriting Agency, Inc. (“DVUA”), DVUA Pittsburgh, Inc., DVUA Massachusetts, Inc., DVUA of New York, Inc., DVUA of New Jersey, Inc., DVUA West Virginia, Inc., DVUA North Carolina, Inc., DVUA of Ohio, Inc., DVUA South Carolina, Inc., and
DVUA Virginia, Inc.; 7) our “Non-U.S. Subsidiaries” refers to our Non-U.S. Insurance Operations, U.A.I. (Gibraltar) Limited, the Luxembourg Companies, Wind River Services, Ltd., and Loyalty Insurance Company, Inc.; 8) our “Non-U.S. Insurance Operations” refers to the insurance and reinsurance and related operations of Wind River Barbados and Wind River Bermuda; 9) “Wind River Barbados” refers to Wind River Insurance Company (Barbados), Ltd.; 10) “Wind River Bermuda” refers to Wind River Insurance Company, Ltd.; 11) the “Luxembourg Companies” refers to U.A.I. (Luxembourg) I S.ar.l., U.A.I. (Luxembourg) II S.ar.l., U.A.I. (Luxembourg) III S.ar.l., U.A.I. (Luxembourg) IV S.ar.l., U.A.I. (Luxembourg) Investment S.ar.l., and Wind River (Luxembourg) S.ar.l.; 12) “United National Group” refers to our U.S. Insurance Operations, Emerald Insurance Company, and Loyalty Insurance Company; 13) the “Statutory Trusts” refers to United National Group Capital Trust I, United National Group Capital Statutory Trust II, Penn-America Statutory Trust I and Penn-America Statutory Trust II; 14) “Fox Paine & Company” refers to Fox Paine & Company, LLC and affiliated investment funds; and 15) “$” or “dollars” refers to U.S. dollars.
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
UNITED AMERICA INDEMNITY, LTD.
Consolidated Balance Sheets
| (Unaudited) | ||||||||
| March 31, 2005 | December 31, 2004 | |||||||
ASSETS |
||||||||
Bonds: |
||||||||
Available for sale securities, at fair value
(amortized cost: $1,042,762 and $575,298) |
$ | 1,038,765 | $ | 585,385 | ||||
Preferred shares: |
||||||||
Available for sale securities, at fair value (cost: $8,160 and $4,804) |
8,056 | 5,112 | ||||||
Common shares: |
||||||||
Available for sale securities, at fair value (cost: $53,046 and $34,004) |
56,645 | 37,894 | ||||||
Other invested assets |
52,051 | 53,756 | ||||||
Total investments |
1,155,517 | 682,147 | ||||||
Cash and cash equivalents |
119,219 | 242,123 | ||||||
Accounts receivable |
20,081 | — | ||||||
Agents’ balances, net |
68,991 | 47,132 | ||||||
Reinsurance receivables, net |
1,530,550 | 1,531,863 | ||||||
Accrued investment income |
12,562 | 7,141 | ||||||
Federal income taxes receivable |
199 | — | ||||||
Deferred federal income taxes, net |
19,170 | 28,372 | ||||||
Deferred acquisition costs, net |
38,395 | 29,735 | ||||||
Goodwill |
98,123 | — | ||||||
Prepaid reinsurance premiums |
47,000 | 42,623 | ||||||
Other assets |
60,695 | 14,801 | ||||||
Total assets |
$ | 3,170,502 | $ | 2,625,937 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||
Liabilities: |
||||||||
Unpaid losses and loss adjustment expenses |
$ | 2,085,199 | $ | 1,876,510 | ||||
Unearned premiums |
240,971 | 152,166 | ||||||
Federal income taxes payable |
— | 1,943 | ||||||
Amounts held for the account of others |
16,066 | 10,234 | ||||||
Ceded balances payable |
24,478 | 22,698 | ||||||
Insurance premium payable |
26,897 | — | ||||||
Payable for securities |
12,638 | — | ||||||
Senior notes payable to related party |
72,848 | 72,848 | ||||||
Junior subordinated debentures |
61,857 | 30,929 | ||||||
Notes and loans payable |
5,010 | — | ||||||
Other liabilities |
39,095 | 26,056 | ||||||
Total liabilities |
2,585,059 | 2,193,384 | ||||||
Commitments and contingencies (Note 11) |
— | — | ||||||
Minority interest |
395 | — | ||||||
Shareholders’ equity: |
||||||||
Common shares, $0.0001 par value, 900,000,000 common
shares authorized, 23,666,898 and 15,585,653 Class A
common shares issued and outstanding, respectively,
and 12,687,500 Class B common shares issued and
outstanding |
4 | 3 | ||||||
Preferred shares, $0.0001 par value, 100,000,000
shares authorized, none issued and outstanding |
— | — | ||||||
Additional paid-in capital |
501,200 | 356,725 | ||||||
Accumulated other comprehensive income |
7,935 | 15,507 | ||||||
Retained earnings |
75,909 | 60,318 | ||||||
Total shareholders’ equity |
585,048 | 432,553 | ||||||
Total liabilities and shareholders’ equity |
$ | 3,170,502 | $ | 2,625,937 | ||||
See accompanying notes to consolidated financial statements.
1
UNITED AMERICA INDEMNITY, LTD.
Consolidated Statements of Operations
| Quarter Ended | Quarter Ended | |||||||
| March 31, 2005 | March 31, 2004 | |||||||
Revenues: |
||||||||
Gross premiums written |
$ | 135,460 | $ | 117,938 | ||||
Net premiums written |
$ | 109,521 | $ | 58,617 | ||||
Net premiums earned |
$ | 102,112 | $ | 45,422 | ||||
Agency commission and fee revenues |
6,252 | — | ||||||
Net investment income |
11,868 | 4,210 | ||||||
Net realized investment losses |
(616 | ) | (70 | ) | ||||
Total revenues |
119,616 | 49,562 | ||||||
Losses and Expenses: |
||||||||
Net losses and loss adjustment expenses |
63,597 | 29,270 | ||||||
Acquisition costs and other underwriting expenses |
31,115 | 11,324 | ||||||
Agency commission and operating expenses |
6,919 | — | ||||||
Corporate and other operating expenses |
1,966 | 1,470 | ||||||
Interest expense |
1,916 | 1,315 | ||||||
Income before income taxes |
14,103 | 6,183 | ||||||
Income tax expense (benefit) |
81 | (656 | ) | |||||
Net income before minority interest and equity in net income of partnerships |
14,022 | 6,839 | ||||||
Minority interest, net of taxes |
32 | — | ||||||
Equity in net income of partnerships |
111 | 579 | ||||||
Net income before extraordinary gain |
14,165 | 7,418 | ||||||
Extraordinary gain |
1,426 | — | ||||||
Net income |
$ | 15,591 | $ | 7,418 | ||||
Per share data: |
||||||||
Net income before extraordinary gain: |
||||||||
Basic |
$ | 0.42 | $ | 0.26 | ||||
Diluted |
$ | 0.41 | $ | 0.26 | ||||
Extraordinary gain: |
||||||||
Basic |
$ | 0.04 | $ | — | ||||
Diluted |
$ | 0.04 | $ | — | ||||
Net income: |
||||||||
Basic |
$ | 0.46 | $ | 0.26 | ||||
Diluted |
$ | 0.45 | $ | 0.26 | ||||
Weighted-average number of shares outstanding: |
||||||||
Basic |
34,258,223 | 28,219,926 | ||||||
Diluted |
34,982,205 | 28,897,621 | ||||||
See accompanying notes to consolidated financial statements.
2
UNITED AMERICA INDEMNITY, LTD.
Consolidated Statements of Comprehensive Income
| (Unaudited) | (Unaudited) | |||||||
| Quarter Ended | Quarter Ended | |||||||
| March 31, 2005 | March 31, 2004 | |||||||
Net income |
$ | 15,591 | $ | 7,418 | ||||
Other comprehensive (loss) income before tax: |
||||||||
Unrealized (losses) gains on securities: |
||||||||
Unrealized holding (losses) gains arising during period |
(11,595 | ) | 5,776 | |||||
Less: Reclassification adjustment for losses
included in net income |
(532 | ) | (291 | ) | ||||
Other comprehensive (loss) income, before tax |
(11,063 | ) | 6,067 | |||||
Income tax (benefit) expense related to items of other
comprehensive income |
(3,491 | ) | 1,725 | |||||
Other comprehensive (loss) income, net of tax |
(7,572 | ) | 4,342 | |||||
Comprehensive income, net of tax |
$ | 8,019 | $ | 11,760 | ||||
See accompanying notes to consolidated financial statements.
3
UNITED AMERICA INDEMNITY, LTD.
Consolidated Statements of Changes in Shareholders’ Equity
| (Unaudited) | ||||||||
| Quarter Ended | Year Ended | |||||||
| March 31, 2005 | December 31, 2004 | |||||||
Common shares: |
||||||||
Number at beginning of period |
28,273,153 | 27,802,503 | ||||||
Class A common shares issued in merger |
7,930,536 | — | ||||||
Class A common shares issued under share
incentive plans |
148,469 | (200 | ) | |||||
Class A common shares issued in IPO |
— | 462,500 | ||||||
Class A common shares issued to directors |
2,240 | 8,350 | ||||||
Number at end of period |
36,354,398 | 28,273,153 | ||||||
Common shares: |
||||||||
Balance at beginning of period |
$ | 3 | $ | 3 | ||||
Class A common shares issued |
1 | — | ||||||
Balance at end of period |
$ | 4 | $ | 3 | ||||
Additional paid-in capital: |
||||||||
Balance at beginning of period |
$ | 356,725 | $ | 347,487 | ||||
Contributed capital from common shares |
142,077 | 7,312 | ||||||
Other |
2,398 | 1,926 | ||||||
Balance at end of period |
$ | 501,200 | $ | 356,725 | ||||
Accumulated other comprehensive income net
of deferred income tax: |
||||||||
Balance at beginning of period |
$ | 15,507 | $ | 10,031 | ||||
Other comprehensive (loss) income |
(7,572 | ) | 5,476 | |||||
Balance at end of period |
$ | 7,935 | $ | 15,507 | ||||
Retained earnings: |
||||||||
Balance at beginning of period |
$ | 60,318 | $ | 23,271 | ||||
Net income |
15,591 | 37,047 | ||||||
Balance at end of period |
$ | 75,909 | $ | 60,318 | ||||
Total shareholders’ equity |
$ | 585,048 | $ | 432,553 | ||||
See accompanying notes to consolidated financial statements.
4
UNITED AMERICA INDEMNITY, LTD.
Consolidated Statements of Cash Flows
| (Unaudited) | (Unaudited) | |||||||
| Quarter Ended | Quarter Ended | |||||||
| March 31, 2005 | March 31, 2004 | |||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 15,591 | $ | 7,418 | ||||
Adjustments to reconcile net income to net cash
provided by (used for) operating activities: |
||||||||
Amortization of debt issuance costs |
45 | 45 | ||||||
Amortization
and depreciation |
310 | — | ||||||
Restricted stock expense |
980 | 423 | ||||||
Extraordinary gain |
(1,426 | ) | — | |||||
Deferred federal income taxes |
(703 | ) | (1,198 | ) | ||||
Amortization of bond premium and discount, net |
661 | 760 | ||||||
Net realized
investment losses |
616 | 70 | ||||||
Equity in net earnings of partnerships |
(105 | ) | (579 | ) | ||||
Equity in net earnings of unconsolidated subsidiaries
and minority interest |
(42 | ) | — | |||||
Changes in: |
||||||||
Agents’ balances |
17 | 6,140 | ||||||
Account receivables |
16,580 | — | ||||||
Reinsurance receivables |
45,221 | 15,890 | ||||||
Unpaid losses and loss adjustment expenses |
(26,503 | ) | (23,688 | ) | ||||
Unearned premiums |
4,527 | 4,096 | ||||||
Ceded balances payable |
(5,549 | ) | (16,056 | ) | ||||
Insurance premiums payable |
(19,598 | ) | — | |||||
Other liabilities |
(896 | ) | (6,556 | ) | ||||
Amounts held for the account of others |
5,709 | (3,135 | ) | |||||
Contingent commissions |
(4,303 | ) | 35 | |||||
Federal income tax receivable |
(593 | ) | 927 | |||||
Prepaid reinsurance premiums |
2,882 | 9,097 | ||||||
Deferred acquisition costs, net |
(8,827 | ) | — | |||||
Other – net |
(2,942 | ) | (9,508 | ) | ||||
Net cash provided by (used for) operating activities |
21,652 | (15,819 | ) | |||||
Cash flows from investing activities: |
||||||||
Proceeds from sale of bonds and stocks |
93,922 | 20,086 | ||||||
Proceeds from maturity of bonds |
7,319 | 5,766 | ||||||
Proceeds from sale of other invested assets |
4,875 | 383 | ||||||
Purchase of bonds and stocks |
(191,377 | ) | (91,371 | ) | ||||
Purchase of other invested assets |
(13 | ) | (750 | ) | ||||
Acquisition of business, net of cash acquired |
(58,529 | ) | — | |||||
Net cash used for investing activities |
(143,803 | ) | (65,886 | ) | ||||
Cash flows from financing activities: |
||||||||
Net proceeds from IPO of common shares |
— | 7,312 | ||||||
Borrowing under credit facility |
504 | — | ||||||
Repayments of credit facility |
(1,148 | ) | — | |||||
Capital lease obligations |
(138 | ) | — | |||||
Change in debt |
29 | — | ||||||
Net cash (used for) provided by financing activities |
(753 | ) | 7,312 | |||||
Net change in cash and cash equivalents |
(122,904 | ) | (74,393 | ) | ||||
Cash and cash equivalents at beginning of period |
242,123 | 214,796 | ||||||
Cash and cash equivalents at end of period |
$ | 119,219 | $ | 140,403 | ||||
See accompanying notes to consolidated financial statements.
5
UNITED AMERICA INDEMNITY, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Principles of Consolidation and Basis of Presentation
United America Indemnity, Ltd. (“United America Indemnity” or the “Company”), incorporated on August 26, 2003, is domiciled in the Cayman Islands. On January 24, 2005, the Company changed its name from United National Group, Ltd. to United America Indemnity, Ltd. The Company’s Class A common stock is publicly traded on the Nasdaq National Market. On March 14, 2005, the Company changed its trading symbol on the Nasdaq National Market from “UNGL” to “INDM.”
The consolidated financial statements include the accounts of United America Indemnity and its wholly owned subsidiaries, Wind River Insurance Company (Barbados) Ltd. (“Wind River Barbados”), U.A.I. (Gibraltar) Limited, U.A.I. (Luxembourg) I S.ar.l., U.A.I. (Luxembourg) II S.ar.l., U.A.I. (Luxembourg) III S.ar.l., U.A.I. (Luxembourg) IV S.ar.l., U.A.I. (Luxembourg) Investment S.ar.l., Wind River (Luxembourg) S.ar.l., Wind River Insurance Company, Ltd. (“Wind River Bermuda”), Wind River Services, Ltd., U.N. Holdings II, Inc., U.N. Holdings Inc., Wind River Investment Corporation, American Insurance Service, Inc. (“AIS”), American Insurance Adjustment Agency, Inc. (“AIAA”), International Underwriters, LLC. (“IUI”), United National Insurance Company (“UNIC”), Penn Independent Corporation (“PIC”), PIC Holdings, Inc. (“PIC Holdings”), Residential Underwriting Agency, Inc., Delaware Valley Underwriting Agency, Inc., DVUA Pittsburgh, Inc., DVUA Massachusetts, Inc., DVUA of New York, Inc., DVUA of New Jersey, Inc., DVUA West Virginia, Inc., DVUA North Carolina, Inc., DVUA of Ohio, Inc., DVUA South Carolina, Inc., DVUA Virginia, Inc., Penn Oceanic Insurance Company, Inc., Penn Independent Financial Services, Inc., Apex Insurance, Inc., Apex Insurance Services of Illinois, Inc., Summit Risk Services Inc., Stratus Insurance Services, Inc., Stratus Web Builder, Inc., Penn-America Insurance Company, Penn-Star Insurance Company, Penn Patriot Insurance Company, Diamond State Insurance Company (“Diamond State”), United National Specialty Insurance Company (“United National Specialty”), United National Casualty Insurance Company (“United National Casualty”), J.H. Ferguson & Associates, LLC (“J.H. Ferguson”), Emerald Insurance Company, and Loyalty Insurance Company. All significant intercompany balances and transactions have been eliminated in consolidation.
The consolidated financial statements as of March 31, 2005 and for the quarter ended March 31, 2005 and 2004 are unaudited, but in the opinion of management have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and on the same basis as the annual audited consolidated financial statements. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The consolidated financial statements include all adjustments that are, in the opinion of management, necessary for a fair statement of results for the interim periods. Results of operations for the quarter ended March 31, 2005 and 2004 are not necessarily indicative of the results of a full year. The accompanying notes to the consolidated financial statements should be read in conjunction with the notes to the consolidated financial statements contained in the Company’s 2004 Annual Report on Form 10-K.
The Company’s wholly-owned business trust subsidiaries, United National Group Capital Trust I (“United National Capital Trust I”), United National Group Capital Statutory Trust II (“United National Statutory Trust II”), Penn-America Statutory Trust I (“Penn America Statutory Trust I) and Penn-America Statutory Trust II (“Penn America Statutory Trust II”), are not consolidated pursuant to Financial Accounting Standards Board (“FASB”) Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”). The Company’s business trust subsidiaries have issued $60.0 million in floating rate capital securities (“Trust Preferred Securities”). The sole assets of the Company’s business trust subsidiaries are $61.9 million of junior subordinated debentures issued by the Company, which have the same terms with respect to maturity, payments and distributions as the Trust Preferred Securities.
Certain prior period amounts have been reclassified to conform to the current period presentation.
6
UNITED AMERICA INDEMNITY, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
Description of Business
The Company offers two general classes of insurance products. These two classes of products are property and general liability insurance products and non-medical professional liability insurance products. Collectively, the Company’s U.S. insurance subsidiaries are licensed in all 50 states and the District of Columbia. The Company’s non-U.S. insurance subsidiaries are licensed in Bermuda and Barbados and Wind River Bermuda is eligible to write surplus lines business in certain U.S. jurisdictions.
2. Acquisition of Penn Independent Corporation and Merger with Penn-America Group, Inc.
Through a series of transactions on January 24, 2005, the Company acquired 100% of the voting equity interest of Penn-America Group, Inc. (together with its subsidiaries, “Penn-America Group”). The Company acquired 67.3% through the merger with Penn-America Group, 30.5% through the purchase of Penn Independent Corporation, which held common shares of Penn-America Group, Inc., and 2.2% in two separate transactions with individual shareholders. In connection with these transactions, the Company paid a $6.0 million transaction fee to Fox Paine & Company. Fox Paine & Company beneficially owns shares having approximately 85.4% of the Company’s total voting power.
Acquisition of Penn Independent Corporation
On January 24, 2005, the Company acquired 100% of the voting equity interest of Penn Independent Corporation (together with its subsidiaries, “Penn Independent Group”), a wholesale broker of commercial insurance for small and middle market businesses, public entities, and associations, from Penn Independent Group’s shareholders for $98.5 million in cash. Penn Independent Group also owns, through its wholly owned subsidiary PIC Holdings, 30.5% of the voting equity interest of Penn-America Group, Inc. Upon the acquisition of Penn Independent Group, the Company also indirectly acquired Penn Independent Group’s shares of Penn-America Group, Inc. common stock. Penn Independent Group’s results of operations are included in the Company’s results of operations subsequent to the date of the acquisition.
The $98.5 million purchase price, which includes transaction related expenses, was allocated to the estimated fair values of the acquired assets and liabilities as follows (dollars in thousands):
Assets: |
||||
Investment in 30.5% of Penn-America Group, Inc. |
||||
Class A common stock |
$ | 65,440 | ||
Other investments and cash |
23,697 | |||
Premium receivable |
36,661 | |||
Accrued investment income |
21 | |||
Federal income taxes receivable |
1,157 | |||
Intangible assets |
2,695 | |||
Capital lease |
1,222 | |||
Other assets |
1,899 | |||
Total |
132,792 | |||
Liabilities: |
||||
Insurance premiums payable |
47,162 | |||
Deferred federal income taxes, net |
6,853 | |||
Federal income taxes payable |
224 | |||
Other liabilities |
8,263 | |||
Notes and loans payable |
5,703 | |||
Total |
68,205 | |||
Minority interest |
431 | |||
Estimated fair value of net assets acquired |
64,156 | |||
Purchase price |
98,540 | |||
Goodwill |
$ | 34,384 | ||
7
UNITED AMERICA INDEMNITY, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(Unaudited)
The transaction was accounted for using the purchase method of accounting. In connection with the acquisition of Penn Independent Group, the assets and liabilities acquired by the Company were adjusted to estimated fair value. The $34.4 million excess of cash and acquisition costs over the estimated fair value of assets acquired was recognized as goodwill.
Acquired intangible assets of $2.7 million were as follows: